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At DMQ Chartered Accountants Registered Auditors we believe the smartest way to handle the January 2027 minimum wage increase is to run the numbers now, not when the first payslip of the new year lands on your desk. The national minimum wage rises from €14.15 to €14.94 an hour, a jump of just under 80 cent. That sounds modest until you multiply it across a full roster, add employer PRSI, and factor in the staff who already sit just above the old minimum and now expect a bump too.

Why this increase costs more than it looks

The headline rate change is only the starting point. Three things make the real cost bigger than a simple hourly calculation:

• Employer PRSI follows pay upwards. From 2027, employer PRSI is 11.40%, rising to 11.55% from 1 October. If your minimum wage staff are on the lower employer PRSI rate of 9.15% (rising to 9.30% from October), that rate only applies where weekly pay is €600 or less. Pushing hours or pay above that line, even slightly, can move an employee into the higher band.
• Pay compression above the floor. Staff earning €15 or €16 an hour were previously ahead of the minimum. Once the floor rises to €14.94, that gap shrinks or disappears. Most employers end up adjusting pay scales a step or two above minimum wage to keep pace, even though the law does not require it.
• Knock-on effects on premiums and allowances. Sunday premiums, overtime rates, and any pay calculated as a multiple of the minimum wage all rise in line with the base figure.

A simple method to model the cost

Before the increase takes effect, work through this checklist with your payroll figures:

1. List every employee currently paid at or near minimum wage. Include anyone within €1 an hour of the old rate, since they are the ones most likely to need an adjustment.
2. Calculate the direct wage increase. Multiply the hourly rise by contracted hours and weeks worked in the year, for each affected employee.
3. Add employer PRSI on top. Apply the correct rate for each employee based on their new weekly pay, checking whether they cross the €600 weekly threshold during the year.
4. Estimate the pay compression adjustment. Decide, realistically, whether staff just above minimum wage will need a proportional increase to maintain their differential, and cost that separately.
5. Total the annual and monthly figures. A single annual number is useful for budgeting, but the monthly figure is what actually hits your cash flow, so keep both.
6. Build it into your 2027 cash flow forecast. Treat it as a fixed cost increase from the first January payroll run, not something to absorb gradually.

Doing this exercise properly, even on a spreadsheet, gives you a realistic figure to work with rather than a vague sense that wages are going up.

Where the Small Benefit Exemption fits in

The Small Benefit Exemption remains unchanged for 2027, allowing up to five non-cash vouchers or benefits per employee, up to €1,500 a year in total, free of tax, PRSI and USC. For employers managing tighter payroll margins, this is worth revisiting as part of your overall reward strategy.

It will not offset a wage increase directly, since it cannot be used to replace contracted pay. But it can help retain staff without adding to base payroll costs that attract employer PRSI. A modest voucher scheme at Christmas or on an employee’s work anniversary costs less than an equivalent pay rise once PRSI is factored in, and it is often more visible and appreciated by staff.

Practical steps before January

• Review contracts and pay scales now, rather than in late December.
• Check which employees will cross the €600 weekly pay threshold once rates rise, as this affects employer PRSI costs.
• Update your payroll software rates in advance and test a sample run before the first live payroll of 2027.
• Communicate any pay scale adjustments to staff early, particularly where compression means smaller increases for those above minimum wage.
• Revisit pricing, particularly in sectors like hospitality, retail and childcare where labour costs are a large share of total costs.

The minimum wage increase is modest in isolation, but combined with rising employer PRSI and the pressure to maintain pay differentials, it adds up to a meaningful cost increase for many SMEs. Modelling it properly now, rather than reacting in January, gives you time to adjust pricing, staffing levels or budgets before the extra cost actually arrives.

If you would like help modelling the payroll impact for your business, or reviewing your pay scales and benefits ahead of 2027, get in touch with DMQ Chartered Accountants Registered Auditors on or [email protected]. You can also find more detail on our services at dmqaccountants.ie.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has
been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute
financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the
publisher nor the authors accept liability for any loss arising from reliance on this material.